Saturday, May 31, 2014

technical bull

There were several encouraging technical signs this week from a bullish perspective. Let’s take a look at the major indices individually and see where they stand this morning (May 30, 2014).

S&P 500 Index ($SPX):
Last Friday around this time the SPX was (once again) trading near the top of its recent trading range and it wasn’t entirely clear if it would break out or drop back down into that range. On Tuesday we got our answer as the SPX moved higher by 12 points and closed near the high of the day. After some consolidation of those gains on Wednesday, traders reinforced the price action breakout with some follow-though buying:

Dow Jones Industrial Average ($DJI):
The DJI chart may not be as bullish as the SPX because it didn’t record a new all-time high in concert with the SPX this week, but it appears to be above its old trading range and looks pretty healthy from my perspective. As of early Friday morning the DJI is down roughly 20 points and is about 50 points away from the all-time closing high it recorded back in mid-May

Russell 2000 ($RUT):
The breakout in the SPX appears to have prompted buying, and a corresponding breakout, in the RUT. If you are bullish it was both encouraging and significant to see the RUT breakout of its recent downtrend and validate the move in the SPX. The RUT has actually been outperforming the SPX recently as it has tacked on 3.5% since last Wednesday (vs. +2.5% for the SPX over the same time frame):

NASDAQ Composite ($COMPX):
Similar to the SPX and RUT, the COMPX broke out above the sideways range that it has been confined within since mid-April. The fact that the breakout in the SPX was accompanied with breakouts in both the RUT and COMPX this week is a good sign for the bulls:

The bulls appear to be in control as markets finally break out of their respective trading ranges and resolve to the upside.
With markets trading near all-time highs I think it’s fairly safe to assume that the “Sell in May and go away” wasn’t the dominant investing philosophy this year.

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